WASHINGTON - Bank of America cannot be held liable for environmental damage caused by a Georgia chemical company though it was a trustee for one of its owners, a federal judge ruled Monday.

Duross Fitzpatrick, a judge on the U.S. District Court for the Middle District of Georgia, granted Bank of America's request for summary judgment in a 1996 case brought by Canadyne-Georgia Corp. The suit had sought to force the bank to contribute $50 million toward the cost of cleaning up the site of a former pesticide plant on the Environmental Protection Agency's Superfund list.

"From an industry standpoint, this case is good news for trustees, executors, and other fiduciaries who potentially face huge cleanup costs for hazardous waste sites even though they in no way caused the contamination," said Douglas S. Arnold, a partner with the Atlanta law firm Alston & Bird, which represented the bank.

The roots of the case go back to 1945, when the former Fulton National Bank of America began to serve as co-executor (and later, co-trustee) of the J.W. Woolfolk Trust. Among its assets, the trust held a general partnership in Woolfolk Chemical Works in Fort Valley, Ga.

Over the years, the names in the story changed: Fulton was acquired by NationsBank, which in turn became Bank of America. The trust sold off Woolfolk Chemical Works, whose name was changed to Canadyne-Georgia.

The court case began in 1996, when Canadyne-Georgia sued Nationsbank in an effort to recoup some of the money it had spent in an EPA-ordered cleanup of the old Woolfolk plant and in settlements with local residents who claimed the plant's discharges had made them sick.

Monday's ruling was Judge Fitzpatrick's second in the case. His first was overturned by the 11th Circuit Court of Appeals in Atlanta in 1999.

In his original ruling, Judge Fitzpatrick dismissed the case, finding that the bank could not be held liable for the cleanup and other damages because the bank was simply a trustee and not an owner of the plant. Additionally, he ruled that banks are protected by law from such suits if they are based on actions a bank takes in fulfillment of fiduciary duty to a client.

In sending the case back to the district court, the appeals court disagreed with the decision to dismiss Canadyne-Georgia's claim on the bank, because federal law governing Superfund sites contains a provision under which a trustee can be held responsible for the release of hazardous substances.

However, because that provision is very limited, the appeals court advised Judge Fitzpatrick that to make such a claim, Canadyne-Georgia would have to prove negligent action by the bank that "caused or contributed" to the release of hazardous material. The ruling found that failure to stop another party from doing so was not sufficient grounds for the suit "because the bank had no duty to prevent someone else from releasing hazardous substances."

In his order of summary judgment, Judge Fitzpatrick ruled that Canadyne-Georgia had failed to offer sufficient evidence that the bank had taken negligent action.

It is unclear whether Canadyne-Georgia will appeal Monday's order.

"We have to study [the order], figure out what options we have, and figure out what is the best way to go for our client," said John C. Spinrad, a partner with Arnall Golden Gregory, the Atlanta law firm that represented the company.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.